Get Away With The Best Holiday Loan
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If an overseas holiday is on the cards, using savings to fund the cost is, of course, an ideal scenario. But if this is just not possible, or your savings are ring-fenced for another purpose, a competitive holiday loan could be the next best solution.
So which holiday loans offer the best value? We carried out some research (July 2022) and listed the deals we found, below. The rates you see are representative. That means you’ll need a very good credit score to qualify. If you are accepted for a loan, the APR you are offered could be much higher.
Something else to bear in mind is that, while information was correct at the time of publication, loan rates are changing frequently. Always conduct a thorough search before making your choice of loan.
Best Holiday Loans
Holiday Loans between £1,000 and £2,999
Holiday loans between £3,000 and £4,999
Holiday loans between £5,000 and £7,499
How are the holiday loans ranked?
We looked at the best holiday loans based on borrowing of between £1,000 and £7,500 – a wide enough budget to cater for anything from a solo traveller, to a family holiday abroad.
Note that we are only considering the cost of the holiday alone, rather than the spending money once you arrive.
To rank the deals, we looked primarily at representative APR but also considered borrowing terms, early repayment charges and late payment fees.
Finally, bear in mind that, while the holiday loan deals are correct at the time of publication and we’ll endeavour to update this page frequently, loan rates can change.
What exactly is a holiday loan?
A holiday loan is essentially an unsecured personal loan. But when you are asked the purpose of your loan during the application process, there is an option to select Holiday. This is for the lender’s own records and to check that a personal loan is the most suitable kind of borrowing. It shouldn’t affect whether you are accepted for the loan or not.
A personal loan allows you to choose how much you want to borrow (which could be between £1,000 and £25,000) and over how long. You then pay back that sum at a fixed rate of interest over an agreed term in a finite number of monthly instalments.
The duration of the personal loan (known as its ‘term’) is up to you – periods of 1 to 5 years are typical, but loan terms of up to 7 years are available. The longer the term, the lower the monthly payments will be. However, you’ll be paying interest for longer, so the total amount you pay over the term will be greater.
Personal holiday loans are ‘unsecured’. This means the debt is not secured against an asset, such as your home. This is different to a secured loan, such as a mortgage, where the lender could take your asset to recover its money if you miss payments.
What are the pros and cons of a holiday loan?
Taking out a holiday loan is a significant financial commitment and requires thought. To make things a little easier, here are the main pros and cons to consider:
Pros
- Fixed payments are handy for budgeting
- Choose the time you need to repay
- Funds paid directly into your bank meaning any surplus can be put towards holiday spending
- You can often borrow more with a personal loan than a credit card or overdraft will allow
- Many loan providers allow for penalty-free overpayments
- Some very competitive rates available.
Cons
- The lowest rates on personal loans are for larger borrowing above £7,500
- The lowest-rate deals require a good or excellent credit score
- Monthly payments are not flexible, like with a credit card
- Personal loans charge interest which means paying back more than the ‘face cost’ of your holiday
- If you want to repay your loan early you’ll be charged one to two months’ interest depending on the term outstanding.
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